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Rationale for the NET Project
- Efforts to reform current economic policy and institutions are invariably confronted by the rationale of prevailing economic theory. Theoretical limitations and misconceptions are a primary root cause of the multidimensional challenges facing humankind today. Without challenging obvious deficiencies in existing theory, it will be very difficult to significantly alter current practices. Contemporary economic thought is built on a mind-frame that originates from the time prior to the Industrial Revolution when scarcity of goods was the primary concern, economic growth was considered synonymous with human welfare, the important role of human and social capital in development was unrecognized, financial markets played a key role in generating investment in the real economy and employment, and the impact of humanity on the environment was completely ignored.
- Conditions have radically changed since then. The world has the capacity to produce sufficient goods and services to meet the needs of all human beings, but the prevailing economic system is dismally failing to abolish all forms of poverty. Economic growth is associated with rising levels of unemployment, widening of inequality and rapid deterioration of the eco-system and resource depletion. Financial markets are misdirecting trillions of dollars into a global casino of speculative investments that drain resources from the real economy and job creation and destabilize the global economic system. Human and social capital are increasingly recognized as the key drivers of ecologically sustainable economic and social progress. The continued pursuit of business as usual is threatening the security, welfare and well-being of humanity and the planet now and in the distant future.
- A new conceptual framework is urgently needed to expose the fallacies in prevailing theory and project an alternative conception attuned to the realities of the 21st century and the welfare of all humanity and the planet. The challenge now is to develop new theory and economic practice with the capacity to create a society that
- Maximizes human welfare and well-being rather than limitless consumption and unregulated economic growth for their own sake
- Manages the world’s resources in a sustainable manner (also for the next generations to come)
- Promotes a more equitable distribution of income derived from the planet’s resources
- Provides employment opportunities and meaningful occupation for all who seek them
- Perceives people as the most precious resource and development of all forms of human and social capacities as the most important form of productive capital
- And, most importantly, maps out a pathway of policies, strategies and radical initiatives to facilitate the transition from the present dangerous economic environment into one that is human-centred, socially beneficial and ecologically sustainable.
- A growing number of academicians, educators, policy-makers, business leaders and informed citizens both within and outside the field of economics have come to the conclusion that such a change is both necessary and feasible. Financial instability, persistent poverty, rising levels of unemployment and inequality, and growing concerns regarding environmental degradation are regarded as manifest symptoms of the gross insufficiency of economics concepts and policies.
- At the same time there is growing awareness of a fundamental paradox in human economic affairs between unmet social human needs and underutilized social capacities. The world is flush with surplus money – about $225 trillion in global financial assets – yet less than 20% of it is being utilized to support the real economy. This unutilized surplus is a major source of the economic instability that undermines investment and job creation. Similarly, a global surplus of unemployed and underemployed people exist side-by-side with a huge unmet need for education, healthcare, construction and other services, yet the current system is unable to effectively harness available human capacities to meet human needs. The same is true with regard to available technological and organizational capacities that remain vastly underutilized.
- Economics is now under siege. The public has become disenchanted and sceptical about the policies and prophesies of central bankers, technical specialists, policy-makers and academics based on current theories. But alternative views rarely reach the public. Many motivated, partly informed citizens are familiar with the situation of not being able to succeed in an argument, even when knowing they are right, because they lack a coherent intellectual framework and arguments to justify their position. A wider, more informed public debate will inevitably lead to a demand for better solutions and a broader acceptance of new approaches. It is not about fighting the past. It is about creating the future. In doing so, it is necessary though to also address the ideas, forces and mechanisms that bind us to the status quo.
- A deep discussion about “old” and “new” economy is taking place and the intensity of this debate has been increasing over the last 20 years or so. This debate takes place in two different ways:
While the public does not feel competent or empowered to seriously engage in the economic debate and therefore resorts to complaining, the intellectual debate does not reach outside the ivory tower and does not effectively elevate the understanding of broader audiences who also want economics to be changed.
- A general debate involving people from all walks of life who feel that something is fundamentally wrong with what we call economics and who feel increasingly vulnerable to economic forces they cannot control.
- A high level debate amongst experts. Probably hundreds of books and thousands of articles have been written on the need for new thinking and practice in economics. At least on paper much is clear. From a technical or intellectual point, we should by now at least have an alternative to the GDP in wide use or have integrated the understanding into public policies that there cannot be unlimited consumption of material resources on a finite planet. In reality however all politicians still use the same mantra of growth, measured indiscriminately in terms of GDP, as the sole measure and source of prosperity, wealth and jobs.
This disconnect is exploited by those who do not want economics to be changed, because they either are stuck in the old mind-frame (many mainstream economists and policy-makers are) or have vested interests in maintaining the status quo.
- Much of the resistance to changes in economic theory is founded on the mistaken view that current economic theory is based on fundamental laws of nature like the laws of motion and gravity. But Economics is a social science and not a natural science. It is not built on natural immutable, mechanistic laws. The laws of Economics are framed by human beings based on the perceptions, values and vision of society. Human beings created the current economic system. Human beings can modify and improve it. The real issue that defines the nature of economy is what kind of future we want to create. Are we satisfied with a set of rules that benefits a small majority and disenfranchises so many? Are we content with a system that undermines earth’s carrying capacity and jeopardizes the future of our children? It is our choice that determines whether we have a world with opportunities for all or a world with increasing inequality and tension. Economy can provide all the jobs we need when job creation and development of human capacities are given priority over speculative unregulated financial markets and rising levels of wealth inequality.
- The problem of economy has to be viewed in a wider context of economic impact on the security of people, the stability of democratic societies and the sustainability of the environment.
Effective solutions do exist to address all our current problems within the framework of a market economy. Earth can be home to 9 billion people living a decent life. Our natural resources can be managed to provide the basic material for many generations to come. Climate change can be prevented. Extreme poverty can be eliminated. It is all a question of an economy that is built on the right values and objectives. The limits we confront are perceptual and intellectual. A human-centred theoretical framework reveals ample scope for policy changes that can achieve full employment, equitable and sustainable development for all. Moving the debate to the underlying driving values and away from the illusion of immutable economic laws will allow everybody to participate in the debate about the future of economy and our planet.
- The transition from the existing to a new paradigm can be supported by working to achieve three goals:
Generating a broad based debate and public discourse to bridge the gap between the increasingly concerned, frustrated and committed citizenry and the academic community.
- Deepening the debate about theory and practice of economy by framing economic theory and policy in the wider context of human security, social stability and ecological sustainability and evolving concepts and practices that align economy with the greater social whole of which it is an important but subordinate part, rather than regarding it as the be-all and end-all in itself.
- Educating the next generation of leaders and policy makers to a set of cogent and coherent alternative perspectives and policy recommendations.